We’ve explored how specialty services can drive clinic revenue, we’re now shifting our focus to the next critical component: contact lens sales. As we delve into this segment, we’ll explore methods for understanding and optimizing your product selection. This analysis will equip you with the tools to make strategic decisions about your contact lens offerings, further enhancing your practice’s overall revenue and success.
Understanding contact lens brand performance is crucial for maximizing your clinic’s revenue. This analysis involves a detailed examination of how various brands contribute to your overall sales and profitability. To get a complete picture, you’ll need to assess key metrics such as revenue per unit, cost per unit, and the effects of price creep.
By understanding these metrics, you can make informed decisions about which brands to prioritize and how to manage your inventory. This strategic approach helps in optimizing product selection, negotiating better terms with vendors, and ultimately improving your practice’s financial performance.
The Truth About Contact Lenses
There is a growing perception among eye care providers that contact lenses are increasingly less profitable, particularly if they are not sold in annual supplies. Rising product costs and the challenge of maintaining margins contribute to apprehension and uncertainty about the sustainability of this segment of the practice revenue. Coupled with push-back from patients who are also watching their spending in a difficult economy, these concerns are creating some serious challenges around contact lens sales.
All this together means that understanding and monitoring your contact lens metrics is absolutely critical. Profit margins – especially for non-annualized supplies – can be razor thin, and inattention can lead to disaster quickly.
While focusing on driving sales of annual supply contact lenses is undoubtedly the most profitable strategy, the reality is that any sale made at a price higher than your acquisition cost contributes something to the practice profitability. Therefore, it’s important to fine-tune pricing and strategize for high-volume (annual supply) sales, but also remember that profitability can potentially be achieved in any properly positioned sale. The key lies in a careful examination of how each brand contributes to your clinic’s revenue and how its associated costs impact overall profitability.
Getting the Right ROI in Contacts
By focusing on the metrics of revenue per unit and cost per unit, you can build valuable insights into which brands offer the best return on investment. This will allow you to identify high-performing brands and make informed decisions about which ones to prioritize, and – potentially – which ones to eliminate.
Begin with a simple approach; record the number of units sold in each brand and/or brand family, and the total revenue for those sales. Extend your analysis by breaking down the revenue per unit. These numbers need to be checked on a quarterly basis.
CONTACT LENS REVENUE
| Brand | Units | Revenue | Rev per Unit | ||
|---|---|---|---|---|---|
| Brand A 90pack dailies | 119 | $10,323 | $86.74 | ||
| Brand B 90pack dailies | 71 | $3,273 | $46.09 | ||
| Brand C 90pack dailies | 2 | $140 | $70 |
Revenue is only part of the equation with contact lens brands. Price creep is another important factor to monitor closely. Contact lens manufacturers, like many other businesses, are responding to rising costs, inflation, and other economic pressures by increasing their prices. This means that the cost per unit for contact lenses is likely to keep pace with general inflation. It’s essential to stay vigilant about unit prices. It’s imperative that you review your supplier invoices regularly, allowing you to make decisions about your own price adjustments, inventory choices, and even your brand selections.
To your existing analysis, add your unit cost for each brand, and calculate your profit per unit (the difference between revenue and cost).
CONTACT LENS BRAND EVALUTION
| Brand | Units | Revenue | Rev per Unit | Cost per Unit | Profit per Unit |
|---|---|---|---|---|---|
| Brand A 90pack dailies | 119 | $10,323 | $86.74 | $36 | $50.74 |
| Brand B 90pack dailies | 71 | $3,273 | $46.09 | $18.04 | $28.05 |
| Brand C 90pack dailies | 2 | $140 | $70 | $23 | $47.00 |
Adopting a strategic approach to brand selection helps to maximize overall profitability. Industry expert, Dr. Ryan Gustus, recommends a “Batman and Robin” strategy, pairing a primary – “hero” – brand, with a carefully selected “sidekick.” By narrowing down your selection to one or two high-performing brands, you can streamline inventory management and strengthen vendor relationships, potentially securing better pricing and terms.
In our example analysis, we can see that our Brand B dailies make up a significant number of unit sales, but are yielding a substantially lower profit result per unit. This lends some validity to a new strategy to move away from recommending Brand B as a more economical option for our patients. If we were to move instead to recommending Brand C – with it’s larger profit result – for patients who are concerned about overall spending on their contact lenses, we could potentially realize a significant change in our overall contact lens revenue for non-annualized sales.
In response to these results, the practitioner may choose to talk to their vendor about improving incentives for increasing the number of units they purchase in their target brands. They may need to revisit their markup strategies, or they may work with their clinic staff to work on scripting and education around products that will better support the practice profitability.
Regularly reviewing and adjusting your pricing strategy helps maintain your profitability despite increased costs.
How to Manage the Metric / Routine
- Establish a Consistent Tracking System
Set up a routine for monitoring revenue and costs associated with each contact lens brand. Regularly analyze how each brand performs in terms of revenue per unit and compare this with the cost per unit. This ongoing assessment helps you identify high-performing brands and manage your inventory and brand strategies more effectively. - Break Down Revenue by Brand
Organize revenue data by specific brands to understand their individual contributions to your clinic’s overall revenue. For example, tracking revenue from each brand separately allows you to see which brands are most profitable and which may require reevaluation. - Monitor Price Trends
Keep an eye on pricing trends for each brand to manage price creep. Regularly reviewing price changes helps you adjust your pricing strategy and ensure that increased costs do not negatively impact your profit margins. - Leverage Vendor Programs
Take advantage of vendor rewards and share programs to increase loyalty and profitability. Building strong relationships with a select number of brands can lead to better terms and incentives, enhancing overall revenue. - Commit to a Focused Brand Selection
Maintain a small, intentional brand mix to streamline inventory and strengthen vendor relationships. By committing to a select few brands, you can negotiate better terms and create a more cohesive inventory strategy.
Expected Outcome
By analyzing contact lens brand performance and managing your inventory strategically, you can achieve a more profitable practice. A focused approach to brand selection and pricing management leads to optimized revenue, improved vendor relationships, and enhanced overall financial health. Practices that implement these strategies can expect to see increased revenue per unit, better control over costs, and a stronger market position.
As we conclude our discussion on optimizing contact lens brand performance, it’s clear that managing brand selection and pricing effectively is key to maximizing profitability. In our next article, we’ll shift our focus to the most crucial aspect of your practice’s contact lens revenue: building and enhancing annual supply sales. By leveraging insights from our current analysis, we’ll explore strategies to boost these important sales and ensure that your practice continues to thrive.
